cannot pay under present conditions until her finances are restored,
and that a moratorium ought to be granted for a period which will
enable that financial restoration to mature. The second is that
Germany can pay, that she is only shamming insolvency, and that all
that you have to do is to apply the thumbscrew firmly and cash will be
forthcoming.
Logically I can understand either of these two alternatives, but I fail
to comprehend the reason for a proposal that will grant a moratorium
on the ground that Germany cannot pay, and at the same time apply the
thumbscrew until she pays.
I am glad the British Prime Minister has had the wisdom not to
associate himself with a policy which will bring inevitable discredit
upon those who share the responsibility of enforcing it.
Meanwhile, the prospects of Europe's recovery are once more to be
retarded by the vain stubbornness of some of her rulers.
_Ronda (Spain), January 6th, 1923._
FOOTNOTE:
[2] This chapter was written at Ronda (Spain).
X
REPARATIONS
What is the reparations problem? Why does it appear to be further from
solution than ever?
The great public in all lands are perplexed and worried by its
disturbing insolubility. It keeps them wondering what may happen next,
and that is never good for a nerve-ridden subject like postwar Europe.
The real trouble is not in solving the problem itself, but in
satisfying the public opinion which surrounds it. I do not mean to
suggest that it is an easy matter to ascertain what payments Germany
can make, or for Germany to pay and keep paying these sums once they
have been ascertained. But if the difficulty were purely financial it
could be overcome. The heart of the problem lies in the impossibility
at present of convincing the expectant, indignant, hard-hit and heavily
burdened people of France that the sums so fixed represent all that
Germany is capable of paying.
The question of compelling a country to pay across its frontiers huge
sums convertible into the currency of other countries is a new one.
At first it was too readily taken for granted that a wealth which
could bear a war debt of £8,000,000,000 could surely afford to bear an
indemnity of £6,000,000,000 provided that this smaller sum were made a
first charge on the national revenues; and it took time for the average
mind to appreciate the fundamental difference between payment inside
and transmission outside a country.
When I think of the estimates framed in 1919 by experts of high
intelligence and trained experience as to Germany's capacity to pay
cash over the border I am not disposed to complain of the impatience
displayed by French taxpayers at the efforts made at successive
conferences to hew down those sanguine estimates to feasible
dimensions. I am content to point with pride to the fact that the
common sense of the more heavily burdened British taxpayer has long ago
taught him to cut his loss and keep his temper. When his example is
followed all round, the reparations question is already solved.
When public opinion in all the Allied countries has subsided into
sanity on German reparations, as it already has in Britain, financiers
can soon find a way out, and trade and commerce will no longer be
scared periodically from their desks by the seismic shocks given to
credit every time a French minister ascends the tribune to make a
statement on reparations.
Regarding the payment of reparations solely from the point of view of
finance, the issues can be stated simply, and I think solved readily.
It is always assumed by those who have never read the Treaty of
Versailles, and the letter that accompanied it, that this much-abused
and little-perused document fixed a fabulous indemnity for payment by
Germany. The treaty may have its defects; that is not one of them, for
it fixed no sum for payment, either great or small.
It stipulated that a reparations commission should be set up in order,
_inter alia_, to assess the damage inflicted by Germany on Allied
property and the compensation for injury to life and limb in Allied
countries.
In the second place--and this is also overlooked--it was to ascertain
how much of that claim Germany was capable of paying. On both these
questions Germany is entitled to be heard before adjudication.
It is in accordance with all jurisprudence that as Germany was the
aggressor and the loser she should pay the costs. But it would be not
only oppressive but foolish to urge payment beyond her capacity.
The amount of damage was to be ascertained and assessed by May, 1921.
Capacity was to be then determined and revised from time to time,
according to the varying conditions. Even so fair a controversialist
as the eminent Italian statesman Signor Nitti has ignored the latter
provision in the Versailles treaty. No wonder that he should, for there
are multitudes who treat every alteration in the annuities fixed in
May, 1921, as if it were a departure from the Treaty of Versailles
to the detriment of the victors; whereas every modification made was
effected under the provisions and by the machinery incorporated in the
treaty for that express purpose.
But there has undoubtedly been a departure from the treaty--a
fundamental departure. It has, however, been entirely to the detriment
of the vanquished. In what respect? I propose to explain, for the
whole trouble has arisen from this change in the treaty. The treaty
provided that the body to be set up for deciding the amount to be paid
in respect of reparations should consist of a representative each of
the United States of America, the British Empire, France, Italy, and
Belgium.
With the exception of the United States of America, all these powers
are pecuniarily interested in the verdict. At best it was therefore
on the face of it not a very impartial tribunal. Still, Britain, as a
great trading community, was more interested in a settlement than in a
few millions more or less of indemnity wrung out of Germany; and Italy
also was a country which had large business dealings with Germany and
would not therefore be tempted to take a violently anti-German view on
the commission. The presence therefore of the United States of America,
Britain and Italy together on the commission constituted a guarantee
for moderation of view.
Now the only disinterested party has retired from the tribunal. The
most interested party is in the chair, with a casting vote on certain
questions. That is not the treaty signed by Germany.
If you sign an agreement to pay a sum to be awarded by A, B, C, D, and
E, trusting for a fair hearing largely to the influence of A, who is
not only very powerful but who is the only completely disinterested
referee and A then retires from the board of arbitrators, you are
entitled to claim that the character of the agreement is changed. The
representatives of France and Belgium on the Reparations Commission are
honourable men who are most anxious to do justice, but they are watched
by a jealous, vigilant and exacting opinion constantly ready to find
fault with concession and to overpower moderating judgment.
The balance of the treaty has therefore been entirely upset. What is
really needed is to restore that balance so as to secure a fair verdict
on the only question in issue--how much Germany can pay.
When you come to consider that issue you must view the claim for
reparations as you would any ordinary debt. You must make up your mind
whether you wish to ruin the debtor or to recover the cash. If there
are no sufficient realisable assets, then, if you want your money, you
must keep your debtor alive. If you want beef from your cow you must
forgo the milk. If your object is to destroy your debtor, you press
for payment of more than he can be reasonably expected to pay, and
then seize his house, his lands, and his chattels, whether they can be
disposed of or not.
On the other hand, if you want your money, you will find out what he
can pay, and then proceed judiciously, patiently, and firmly to recover
that amount. By that I do not mean what he can pay by condemning
himself to a life of servitude and poverty. No brave nation will
stand that long. That is not a method of recovering an old debt, but
of creating a new one. I mean, what a nation can be expected to pay
steadily without revolt for a whole generation.
If you scrape the butter from the bread of every German child for
thirty years you may add to the sum of your indemnity a milliard or
two of gold marks. That is not what was intended by the Treaty of
Versailles. Hungry faces make angry hearts, and the anger spreads
further than the hunger. I mean, what Germany can pay without
condemning a generation of workers to Egyptian bondage, and their
children to semi-starvation. Every oppression, if persisted in,
ultimately ends in the ruin of the Red Sea for the oppressors. Europe
has only just escaped with great loss from its waters. We do not want
to be overwhelmed in another.
How are you to arrive at the exact figure of the annuities Germany
can reasonably be expected to pay without creating these intolerable
conditions for her people? That is the question. The answer was given
in the treaty as signed: by setting up a commission to inquire and
determine. That commission has been weakened, and its character almost
destroyed by the defection of the United States of America.
Is it possible to find a substitute? I am afraid a reference of that
question to a new committee of experts would not advance matters, for
each country would demand a representative on that committee, and that
would only mean the Reparations Commission over again under another
name.
The only hope of a fair and final decision is to secure the presence of
a representative of the United States of America on the adjudicating
body, whatever it may be. Is that impossible?
I need hardly say that I am not venturing to express any opinion as to
the American refusal to ratify the treaty as a whole. I am only stating
quite frankly my view that, unless America takes a hand in reparations,
real settlement will be postponed until the hour of irreparable
mischief strikes. If for reasons of which I am not competent to judge
America cannot occupy her vacant chair on the tribunal which may decide
fateful issues for humanity, I despair of any real progress being made.
Allied ministers can accept from a body representing the leading
powers who won the war decisions they dare not take on their own
responsibility. That is the essence of the matter. It is no use blaming
politicians. If they of their own initiative attempt to ride down
public sentiment, which alone confers authority upon them, they will
inevitably fail. In every country there are plenty of itching partisans
ready to take advantage of tactical blunders committed by political
opponents or personal rivals. But the judgment of an international
tribunal is another matter, and statesmen can accept it and act upon it
without being taxed with responsibility for its conclusions.
British opinion cannot and will not accept a settlement based on the
assumption that abatements in the sum claimed for reparations, if and
when made, must be discounted by the British taxpayer alone.
France undoubtedly suffered more severely from the ravages of war
than any other belligerent. But that is recognised in the proportion
allocated to her of the reparations payments. She is to be paid 52 per
cent. of the total, _i. e._, more than all the other Allied countries
put together.
Britain comes next in the damage sustained by her people, and she is
given 22 per cent. In many respects she has suffered more heavily than
any other Allied country, especially in taxation and in trade. She is
willing to stand in with the Allies for loss as well as for profit, but
she will resent bitterly the suggestion that the loss must necessarily
be her share, whilst such profit as there is belongs to others.
The American people, who receive no part of the compensation awarded
and collected, will _a fortiori_ take the same view of their
obligations in the matter. They certainly will not see the force of a
settlement to be made at their expense, as if they had been condemned
to pay an indemnity.
The question is not what remission or indulgence shall be granted to
Germany, but what payment she is capable of making. If Germany can pay
a large indemnity France gets 52 per cent. of that, and Britain only
22 per cent. If Germany can only make a disappointing payment, France
still gets 52 per cent. and Britain 22 per cent. There is, therefore,
no ground for debiting Britain and America with the cost of reduced
expectations.
The offer to hand over the worthless "C" bonds to the British Empire in
return for her claims is an insult to the intelligence of the British
public. Let us get away from these shifts on to the straight road. Back
to the treaty--that is the real remedy. There is no need to revise
it--all that is required is to restore it.
If America reappears on the arbitrating tribunal she need not accept
the rest of the treaty. Then a fair and enduring settlement would soon
ensue, this irritating sore would rapidly heal, and the condition of
the world would steadily improve.
_Algeciras, January 1st, 1923._
XI
MR. HUGHES'S NEW HAVEN SPEECH
The preceding chapter was written at Algeciras on January 2nd, 1923.
On January 3rd there appeared in the Spanish papers a compressed
report of the speech delivered by the American Secretary of State, Mr.
Hughes, at New Haven. It made suggestions on the subject of reparations
which were obviously intended for consideration at the forthcoming
Paris conference. I knew the chairman of that conference, M. Poincaré,
would not be too anxious to bring these proposals to the notice of his
colleagues, but I had some hope that the British, Italian, and Belgian
premiers might do so. I therefore cabled the following message to the
British and American press:--
"I have read with gladness Secretary Hughes's important speech.
As far as I can judge from compressed report appearing in the
local paper of this remote corner of Spain his suggestions and
mine travel in same direction. Earnestly hope Paris conference
will give American proposals priority of consideration. All other
expedients will but postpone mischief which will in the end have
to be redeemed with compound interest at usurious rates by an
embarrassed Europe."
I constantly refer to this speech in subsequent articles, and as it has
been suggested that the interpretation I placed on it is not borne out
by the text, I append the full report which appeared in _The Times_ of
December 30th, 1922:--
"Mr. Hughes, the Secretary of State, in a speech which he
delivered before the American Historical Association at New Haven,
Connecticut, to-night lifted yet another corner of the veil which
has shrouded the immediate plans of the United States government.
Much of his address concerned the Washington conference of 1921,
but it ended with a discussion of economic conditions in Europe
which are of prime importance.
"Mr. Hughes began with the admission that 'we cannot dispose
of these problems by calling them European, for they are world
problems, and we cannot escape the injurious consequences of
failure to settle them.' They were, however, European problems in
the sense that they cannot be solved without the consent of the
European governments, and the _crux_ of the situation lay in the
settlement of reparations. 'There will be no adjustment of other
needs, however pressing, until a definite and accepted basis for
the discharge of reparations claims has been fixed. It is futile
to attempt to erect any economic structure in Europe until the
foundation is laid.'
"Then followed a passage referring to the attempts to link up the
debts owed to the United States with the question of reparations
or with projects of cancellation, attempts which had been steadily
resisted. It led up to a discussion of the attitude of the United
States towards reparations, 'standing, as it does, a distinct
question, and as one which cannot be settled unless the European
governments concerned are able to agree.' First came a denial that
America desired to see Germany relieved of her responsibility
for the war, or of her just obligations, or that America wished
that France should lose 'any part of her just claims.' On the
other hand, America did not wish to see a prostrate Germany. Some
Americans had suggested that the United States should assume the
_rôle_ of arbitrator, but Mr. Hughes did not think 'we should
assume such a burden of responsibility.'
"From this point the speech deserves quotation in full:
"'But the situation,' said Mr. Hughes, 'does call for a settlement
upon its merits. The first condition of a satisfactory settlement
is that the question should be taken out of politics. Statesmen,
have their difficulties, their public opinion, the exigencies they
must face. It is devoutly to be hoped that they will effect a
settlement among themselves, and that the coming meeting in Paris
will find a solution. But if it does not, what should be done?
"'The alternative of forcible measures to obtain reparations is
not an attractive one. No one can foretell the extent of the
serious consequences which might ensue from such a course. Apart
from political results, I believe that the opinion of experts
is that such measures will not produce reparation payments, but
might tend to destroy the basis of those payments, which must be
found in economic recuperation. If, however, statesmen cannot
agree, and such an alternative is faced, what can be done? Is
there not another way out? The fundamental condition is that in
this critical moment the merits of the question as an economic
one must alone be regarded. Sentiment, however natural, must be
disregarded; mutual recriminations are of no avail; reviews of the
past, whether accurate or inaccurate, promise nothing; assertions
of blame on the one hand and excuses on the other come to naught.
"'There ought to be a way for statesmen to agree upon what Germany
can pay, for no matter what claims may be made against her that is
the limit of satisfaction. There ought to be a way to determine
that limit and to provide a financial plan by which immediate
results can be obtained and European nations can feel that the
foundations have been laid for their mutual and earnest endeavours
to bring about the utmost prosperity to which the industry of
their people entitles them.
"'If statesmen cannot agree and the exigencies of public opinion
make their course difficult, then there should be called to their
aid those who can point the way to a solution.
"'Why should they not invite men of the highest authority in
finance in their respective countries--men of such prestige,
experience, and honour that their agreement upon the amount to
be paid and upon the financial plan for working out payments
would be accepted throughout the world as the most authoritative
expression obtainable? The governments need not bind themselves
in advance to accept the recommendations, but they can at least
make possible such an inquiry with their approval and free the
men who may represent their country in such a commission from
any responsibility to foreign offices and from any duty to obey
political instructions.
"'In other words, they may invite an answer to this difficult
question from men of such standing and in such circumstances of
freedom as will ensure a reply prompted only by knowledge and
conscience. I have no doubt that distinguished Americans would
be willing to serve on such a commission. If the governments saw
fit to reject the recommendation upon which such a body agreed
they would be free to do so, but they would have the advantage
of impartial advice and of an enlightened public opinion. The
peoples would be informed that the question would be rescued from
assertion and counter-assertion and the problem put upon its way
to solution.
"'I do not believe that any general conference would answer the
purpose better, much less that any political conference would
accomplish a result which prime ministers find it impossible to
reach. But I do believe that a small group, given proper freedom
of action, would be able soon to devise a proper plan. It would be
time enough to consider forcible measures after such opportunity
had been exhausted.'
"Mr. Hughes's closing words were:
"'There lies the open broad avenue of opportunity, if those whose
voluntary action is indispensable are willing to take advantage
of it. And once this is done, the avenues of American helpfulness
cannot fail to open hopefully.'"
The argument developed by Mr. Hughes in this speech is identical with
that upon which I based my appeal in the previous chapter for an
impartial investigation into Germany's capacity, and he concludes with
a proposal which is in effect identical with mine. He does not state
categorically that the American government would be prepared to be
officially represented on the commission. But when he says, "I have
no doubt that distinguished Americans would be willing to serve on
such a commission," it means that the government would be indirectly
represented. The Allied governments would certainly have consulted the
government of the U.S.A. as to the American representative nominated
to sit on the commission, and no American expert would be appointed
without full assurance that he was acceptable to the government of his
country.
It is a misfortune that such important proposals should have been put
forward so timorously that those who wished to ignore them could easily
pretend they had never heard them made. Speeches delivered even by
Secretaries of State at an academic function in a small provincial town
might very well be overlooked in foreign chancelleries, whose postbags
bulge with weighty despatches from many lands, without any suggestion
of studied neglect. It was clear from Mr. Bonar Law's subsequent
attitude in the course of the debate in the House of Commons on the
Ruhr invasion that he at any rate had not seen Mr. Hughes's New Haven
deliverance. Timid diplomatic flutterings make no impression in a great
situation, and so lead to nothing. This is an excellent example of how
not to speak if you wish to be heard, and of how to speak if you have
no desire to be heeded.
_London, July 4th, 1923._
XII
THE FRENCH INVASION OF THE RUHR
France has once more jumped on the prostrate form of Germany, and
the sabots have come down with a thud that will sicken the hearts of
multitudes on both sides of the Atlantic whose friendship for France
stood the losses and griefs of a four years' war.
Germany having been overthrown and disarmed after a prodigious effort,
involving a strain upon the combined strength of America, Italy, and
the whole British Empire, as well as France, and her arms bound with
the thongs of a stern treaty, the process of dancing upon her while she
is down can at any time now be performed with complete impunity by any
one of these powers alone.
The spectacle every time it is repeated, provides much satisfaction to
those who indulge in the barren delights of revenging the memory of
past wrongs. There is no doubt some joy for the unsportsmanlike mind
in kicking a helpless giant who once maltreated you and who, but for
the assistance of powerful neighbours, would have done so a second time.
But what good will it bring devastated France or her overtaxed Allies?
The additional coal and timber that will be wrung out of Germany will
barely cover the direct cost of collection. Although Germany bears the
extra cost, the expense of these punitive measures must all in the end
diminish the means of reparation, and therefore fall on the victor.
How many students of the problem of reparations have ever taken the
trouble to ascertain the extent to which the maintenance of Allied
armies of occupation has already drained the resources of Germany?
Between direct cash payments, the cost of supplies, and outlay in
labour and material for building huge barracks, these armies have
already cost Germany 6,000,000,000 gold marks--roughly 1,200,000,000
dollars, or over £300,000,000.
How much better it would have been if most of this money had gone
towards rebuilding the devastated area!